All Things In Moderation, Or Why You Shouldn’t Take All Of The Advice At The Simple Dollar

Recently, a reader contacted me via instant messenger and expressed some deep sadness as a result of reading and trying to do the things she had read on The Simple Dollar. For two months, she scrimped and saved and managed to pay off almost her entire credit card debt, but at the end of it she began to feel like she was missing out on life. So she called up a friend of hers, they went out on the town, and she blew $1,200 splurging on clothes, CDs, and other stuff, putting her right back where she was at the beginning.

Here’s the problem: if you’re going to do a “money makeover,” which is effectively what this lady was trying to do, you either need incredible willpower or you need to follow a strategy of moderation, especially at first. Why? By jumping head first into a highly frugal lifestyle directly from a lifestyle of living beyond your means, you’re engaging in a truly major lifestyle change that will have day-to-day ramifications that you can’t even imagine yet, let alone the psychological ramifications.

Think of it in terms of a diet. Dieting works best with a framework of support and a framework of moderation. If you commit yourself to switching from eating fast food completely to eating lots of salad, and you don’t have people supporting you, what’s the likely outcome? My wife likes to refer to diets like these as “Sara Lee poundcake diets;” in short, you end up splurging because of the physical, emotional, and psychological factors.

In short, if you’re in need of a solution to your financial problems, don’t try everything at once. Instead, try something like this:

Read through The Simple Dollar (or another personal finance resource) and find those things that seem compatible with your life. I might talk about doing things like making your own laundry detergent or saving $20 a day for a year, but let’s face it: large things like that aren’t for everyone. On the other hand, you can easily trim your grocery bill by making a shopping list, and perhaps socking away $5 a day is more your speed. You do not have to follow every piece of financial advice you read or hear; in fact, doing so is a bad idea. Instead, find ones that seem compatible with your life and go for it.

Set lots of short term milestones that you can actually reach. Commit yourself to using the savings from more efficient grocery shopping to making a double payment on your credit card. See if you can accomplish a money free weekend or a week of frugality. At first, don’t make enormous goals that seem unapproachable; you’re learning to walk, not learning to climb mountains at this point.

Reward yourself a bit. That doesn’t mean go and drop $1,200 on stuff like our friend did. If you like books, reward yourself with a new selection – even better, go to the library, sign up for a library card, and check it out from there. Like to eat out? Allow yourself one dinner out for every so many dinners you prepare yourself at home. Small rewards like these won’t undo your progress and, even better, they begin to feel like real treats instead of part of everyday life – your enjoyment of things like eating out will go way up.

When things are running smoothly, add more things to the mix. If you’ve been saving $5 a day for a few months and have built up a nice emergency fund, how about kicking it up to $7 a day? If you installed CFLs and saw a big drop in your electric bill, why not spend a few hours looking at other energy savers, like programmable thermostats? If you finally paid off your car loan, how about keeping that car for another year or two and making those payments instead to a savings account so that when you go to buy the next car, your loan is much smaller (or maybe you can just write a check for it)? Keep adding little pieces to your frugal lifestyle.

I’ll share one final anecdote that I hope will inspire you. When I was first figuring out that I needed to make some major changes to my life, I tried making tons of changes at once and it failed miserably – and very quickly. However, I did pull some very nice pieces out of that train wreck: I discovered the local library (which I’m now almost addicted to), I learned how to use a shopping list, and I had switched all my light bulbs to CFLs. Two months later, when I sat down and did my bills, I was almost stunned to find that I suddenly had a few hundred dollars left over at the end of the month when I would have been scraping two nickels together. In short, it was by just doing a few things in the beginning that I began to see the power that it had – and soon I was trying all sorts of things that I would have never dreamed of before.

I’m in a similar situation now. I’ve been saving diligently, paying off debt, and this month found myself with some extra cash. But because there’s nothing I want particularly, and everything I want rather generally, I’ve been just sitting on it. In the end, it may just go toward my credit cards after all, if I decide that’s what will bring me the most satisfaction. Dreaming about spending the money is almost more fun than actually spending it.

Frugality is hard because it goes against how our society is structured. We are constantly bombarded with advertising and told that we need more stuff. To some extent buying is an addiction and you need to tackle that problem as such. Credit card debt is the most insidious since it’s high interest but tempting to use. Paying it off and keeping it off will add hundreds of dollars to your net worth every year from interest savings alone.

Start small.

Get up 10 minutes earlier and make coffee in the morning rather than buying it at starbucks.

that reader has no one but herself to blame for lapsing or whatever you want to call it.

the issue is changing behavior. the problem with paying everything off at once is that she probably didn’t establish good financial habits/behavior, despite paying off her bills. it sounds like her focus was ONLY on paying bills rather than establishing a long-term budget and financial plan. there is a difference between the two. often when people are in debt and are trying to get out of debt, they focus on the getting out of debt portion rather than the big picture financial plan which includes saving, spending, and paying off bills.

despite being non-optimal in terms of numbers, you need to save some while paying off bills. yes, you will pay more interest and it will take longer, but you will have est. good fundamentals. undoubtedly the reader did not put anything aside into retirement or emergency fund while trying to pay things off as quickly as possible. you need to have a “what now” plan once you are out of debt. this is why having short, mid, and long term goals are important. it keeps you focused.

i don’t believe in splurges or treating yourself. this implies that you are going to spend beyond your budget. if you “want” something, then include it in a budget.

I believe in little splurges to celebrate milestones. When I got back tests showing my cancer had not returned, I went right out and got a latte. When my investment funds hit a certain profound milestone, I bought a piece of furniture I had been coveting for several years. As you say, moderation is the key.

I also found it very helpful to figure out why we want to get out of debt. Figuring out your core value or goals helps generate the motivation for getting out of debt. IMO getting out of debt is not the goal, but the means to accomplishing your goals.
When you look at it that way, you can view each ounce of restraint and hard work as a piece of something you really truly desire. Then material rewards don’t matter as much, because getting closer to your tangible dreams gives your more joy then some object.

My mantra is: Do what works for you. The things that you and other pfbloggers share are techniques that have worked for some people. They won’t work for everyone. A large part of personal finance is learning who you are an how you operate, so that you know, for example, that you don’t want to make your own detergent, or grow your own vegetables or whatever. The key is learning to work with your strengths and weaknesses to develop a personalized plan.

not your fault , anyone who splurges “regretfully” $1200 in a day has some issues . She should spend a bit of money on addressing the issues with a good licensed therapist first. Then learn to take responsibility for her actions. She’ll probably end up happier and less irrational.

Using tunnel-like vision to pay off debt has not worked for me, either. At the end of the day, I still felt that I had nothing to show for my hard work and economizing. Instead of focusing on total debt elimination, I am now focusing on saving and learning the art of investing. I still have debt, but just shifting my priority to saving and investing has completely changed my outlook. I now have something to show for it at the end of the day: two on-line savings accounts earning 5.05% interest, and an account at treasurydirect. My goal for this year is to fully fund an IRA. I will have a car loan paid off this year and a personal loan paid off next year. I will have a student loan balance for what seems like an eternity. But if I waited to save and invest when all of the debt was gone, I would feel hopelessly behind in the game. My feeling is this: no more new debts. Once my current debts are gone, I will be in prime position with my savings and investments to make wise purchase decisions in the future. Focusing on past debt is a weight to carry around. Focus instead on building the future.

I would also like to add a comment about credit cards. I personally think they are the devil! I do not care what kind of rebate, cash back, rewards program they offer, they are simply a tool to get most people to spend money on things they do not really need. A debit card works just as well as a credit card for on-line purchases, etc. When I hear people say they need a credit card for emergencies, it makes me cringe. That is what a savings account is for. Believe me, it took a long time for me to get to this point. What constitutes an emergency anyway? A blown tire, a gas tank on E, a much needed cup of coffee that can be purchased with a credit card? Living without going into debt at every turn does require vigilance, discipline, and creativity. Use what you have on hand. Pay cash and you will think twice about buying the latest designer dig or gizmo. I can’t even remember the last thing I “had to have” that I bought with a credit card. I am sure it is sitting in a closet or in the basement collecting dust. The rush or high I also felt when buying something on credit was always replaced with anquish and fear when I had no earthly idea of how I was going to pay for it by the 28th of each month. Take it from one who has been on the debt merry-go-round for most of her life: peace of mind and a bit of financial security is much more important than the lastest gizmo that you don’t need in the first place!

Lately I’ve been stressing a lot about my debt and my financial situation. I’d been reading lots, trying to get all my finances in order. It was all starting to get too much. Luckily for me, before I got too bogged down and disillusioned, I came across two things.

One was this post, the other was one of the generated Amazon advertisements which was touting the following products: 100 things you should ask about your financial planner; Rich Dad, Poor Dad; Deal with your debt; and the Warren Zevon album “I’ll sleep when I’m Dead”.

Books worth budgeting for

My new book, The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams, is available in bookstores now. Check out some of the life-changing experiences the book has given readers!

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